By Steve Horn, a freelance investigative journalist and past reporter and researcher at the Center for Media and Democracy. Originally published at DeSmogBlog
President Donald Trump‘s newly proposed budget calls for selling over half of the nation’s Strategic Petroleum Reserve (SPR), the 687 million barrels of federally owned oil stockpiled in Texas and Louisiana as an emergency energy supply.
While most observers believe the budget will not pass through Congress in its current form, budgets depict an administration’s priorities and vision for the country. Some within the oil industry have lobbied for years to drain the SPR, created in the aftermath of the 1973 oil crisis.
Leading the way has been ExxonMobil, which lobbied for congressional bills in both 2012 and 2015 calling for SPR oil to be sold on the private sector market. The Trump administration says selling off oil from the national reserve could generate $16.58 billion in revenue for U.S. taxpayers over the next 10 years.
But EnergyWire’s Peter Behr reported that the Trump SPR budget proposal would potentially violate U.S. commitments as a member of the International Energy Agency.
“As a member of the International Energy Agency, the United States must store enough petroleum to equal at least 90 days of U.S. crude imports, according to DOE,” wrote Behr. “The SPR held the equivalent of 141 days of imports as of last September, so cutting the supply in half would apparently put the United States below its commitment to global stockpiles, an insurance policy against a major loss of crude supply from conflict or natural disasters.”
Trump’s budget plan would not only reduce the SPR storage to a level of 260 million barrels, it would shut down two of the four SPR sites.
Lobbying to Draw Down Oil Reserves
Exxon, as well as the American Petroleum Institute (API) and the Independent Petroleum Association of America (IPAA), have long lobbied for a drawdown of SPR‘s supply, according to lobbying disclosure records reviewed by DeSmog. They supported two key bills, proposed but never passed by Congress: H.R. 4136 in 2012 and S. 1231 in 2015.
H.R. 4136, lobbied for by Exxon, API, and IPAA, says that the Strategic Petroleum Reserve can only be tapped if more federally owned public lands and waters were leased to the oil and gas industry. S. 1231, the Strategic Petroleum Reserve Modernization Act of 2015, called for a Department of Energy study of the SPR “to determine options available for [its] continued operation,” to be completed 180 days after the bill’s passage.
Credit: Congress.gov
Exxon was the sole company to lobby for S. 1231, advocating for it across seven quarters in 2015 and 2016. While Exxon lobbied to make SPR oil available on the open market, the company actually purchased 500,000 barrels of oilfrom the reserve in 2014, under the auspices of a test auction called for by then-U.S. Secretary of Energy, Ernest Moniz.
After the 2014 test bid, Moniz also advocated for a drawdown of the SPR.
“The value of the SPR is its capability to move significant and incremental barrels into the global market, in effect, moving beyond the framework of import protection,” Moniz said at the U.S. Energy Information Administration’s 2015 annual conference. “We need to ensure that in an oil emergency — a global disruption — we are actually putting incremental barrels into the market and not effectively shutting in our own production. The more incremental oil from the SPR we can move into our own markets, the more foreign cargoes can be rerouted.”
In addition, nearly a decade before the test auction, Exxon was granted permission to buy six million barrels of oilfrom the SPR in the aftermath of Hurricane Katrina.
Heritage Foundation Push
The Heritage Foundation, a long-time grantee of ExxonMobil and conservative think tank with GOP ties, advocated for emptying the SPR in its report, “Why Congress Should Pull the Plug on the Strategic Petroleum Reserve,” written by Nick Loris in 2015.
“[T]he SPR is unnecessary in the first place. Private inventories and reserves are abundant, and open markets will respond more efficiently to supply shocks than federally controlled government stockpiles,” wrote Loris, who began his career as an associate for the Charles G. Koch Charitable Foundation. “Congress should authorize the Department of Energy to sell the entire inventory, using the revenues solely for deficit reduction.”
The Heritage report also calls for the U.S. to withdraw from the International Energy Agency, a necessary next step if the Trump budget passes in Congress with the SPR proposal intact.
“Disengaging from the IEA’s Agreement on an International Energy Program would not stop the U.S. from working with IEA member countries that promote free markets in energy, but it would stop the U.S. from committing to ineffective and unnecessary energy obligations,” Loris wrote.
Heritage also published a more recent report in 2016 titled, “Blueprint for Reform: A Comprehensive Policy Agenda for a New Administration in 2017,” to which Loris again contributed. That report calls for bottoming out the SPR little by little over the next decade, paralleling the Trump budget proposal.
“Congress should authorize the Department of Energy to liquidate the entire inventory, using the revenues solely for deficit reduction,” reads the report’s section on Department of Energy budget suggestions, referring to Loris’ 2015 report. “So as not to disrupt oil markets, DOE should sell the SPR oil by auctioning periodically an amount not exceeding 10 percent of the country’s previous month’s total crude production until the reserve is completely depleted.”
As EnergyWire reported in March, more than 30 Heritage Foundation staffers worked for Trump’s White House transition team. And while Loris has stayed at Heritage, he maintains close ties with those now in the White House, including his former boss, Paul Winfree.
Winfree works as the White House director of budget policy and deputy director of the Domestic Policy Council. According to Heritage, he played a key role in drafting Trump’s proposed budget. He also formerly served as director of income security for the U.S. Senate Budget Committee under then-Sen. Jeff Sessions (R-AL), who currently serves as U.S. Attorney General.
Well before Heritage began advocating for depleting the SPR, the Koch Industries-funded libertarian Cato Institute also wrote in support of selling off the reserves back in 2001.
“Line of Defense”
However, not everyone is on board with the proposed move to drain the Strategic Petroleum Reserve, calling it a national security threat. Securing America’s Future Energy (SAFE), an advocacy group in favor of weaning the U.S. off of its “dependence on oil and promoting responsible use of our domestic energy resources,” has come out against the SPR proposal.
“The SPR is America’s only formal short-term line of defense against oil supply disruptions and price spikes — the current trend of seeing this resource as a revenue generator is misguided, as is risking drawing it below International Energy Agency (IEA) compliance volumes,” SAFE president and CEO, Robbie Diamond, said in a press release. “Furthermore, the SPR only works if it can get its petroleum to market quickly and efficiently in the event of a supply emergency. SAFE recommends that the SPR not be drawn down for general government spending, as reducing it to such low volumes undermines the ability to use the SPR for its intended purpose.”
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EV’s are projected to replace gas vehicles in the next 8-10 years making oil old technology and to the dust bin of history. Better to sell the oil now than it be worthless later.
Yep, the clock’s ticking. No matter what happens to the SPR, America can sleep soundly knowing we’ve got a billion cubic meters of helium stored.
Should a real crisis occur, helium tanks will be distributed to our leaders so they can squeak to us in chipmunk voices.
They should start distributing it now. I want to hear those ‘leaders’ squeak May be if they inhale enough helium they can float away.
Really? One one would think every third driver would be in a volt or Tesla. The uptick in large SUV sales must also be indicative of the fact that soon everyone will drive electric.
And please tell me how the 70% of the population who mostly drives and has less than $1000 in savings is going to afford the new electric vehicles? Will Tesla be giving them away?
It’s almost like reality doesn’t support the projections.
Yeah I’ve been taking potshots on the EV side of this argument, I need to clarify:
I am sure that EVs are the future, 8-10 years for sales domination may be a little quick but maybe not — but why do people keep reading that as “gas powered vehicles disappear”? It clearly says that they will be a new vehicle market afterthought, but used ones will be with us, maybe not forever like the poor but a substantial part of the fleet for a decade after, before they wear out.
And as our economy keeps spreading between the haves and have nots, the proportion of new to all vehicles will continue to drop. Gas prices will drop as demand does drop, and every gas vehicle replaced by an electric will provide cheap parts, again for the have-not majority, to keep another gas vehicle alive.
This means the bottom 3/4 of the population will find themselves driving gas vehicles whether they really want to or not. Just like people live in (crummy, not NY luxo) apartments rather than detached single family homes. They don’t have a real choice.
Finally, what about the, say 25% of pickup trucks/Suburban-style vehicles sold that are actually necessary? The F150 won’t be the biggest seller anymore but it will still be big. It will take a lot longer to replace them with pure EVs.
PS: What will be interesting will be the reduction in numbers of gas stations and how this affects the (already stupid) gas vs electric “range” argument.
PPS: we may make people so poor most of us will be riding the (electric) bus again, I didn’t take that into consideration to be honest…
Truck and SUV sales were 63% of all auto sales. Have yet to see an electric pick-up. Ken also seems to miss the point that the average scrappage/turnover rate for vehicles in this country is increasing (up to ~ 15 years for the 2000’s decades). With low oil prices and no real incentives to have consumers convert to electrics sooner, Ken’s quote of 8-10 years is pie in the sky dreaming.
They’ll probably force everyone to switch over to EV’s (military and police excepted!), but provide no financial assistance to do so. Windfall in new car loans for the “free” market banks…
Put more clearly the average age of a vehicle in the us is over 11 years right now. So assuming an electric vehicle that met folks full needs including range and quick charging was introduced, figure at least 15 years for a majority of vehicles to be electric and 20+ for 80% plus penetration. The average age of cars is increasing after all there are now 7 year car loans for example.
“In 2016, the United States consumed a total of 7.19 billion barrels of petroleum products, an average of about 19.63 million barrels per day.”
https://www.eia.gov/tools/faqs/faq.php?id=33&t=6
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This is a complete non issue. From a policy standpoint, only a 35 day supply of crude before Dies Irae in case of OPEC/Russian Embargo. Not likely to happen with all of the LUK OIL gas stations in America. That would be a Russian gas chain. At any rate, I derived this quantity by dividing the 687 Million barrels of crude oil by daily usage in the US, which you might note last year was almost 20Mil/brl/day.
Now, I am not taking into account non-compliance of treaty obligations or other rules and regs domestically. I think you can see this is just a way to sell off a government asset, enabling an offset for a tax reduction. Nothing more. Privatization at its best. I mean, if anyone is going to horde a supply of a critical commodity fuel, it damn well better not be the government. What was Nixon thinking? Oh, who cares what he was thinking, he’s dead and good riddance.
Yup. I liked this:
“and open markets will respond more efficiently to supply shocks than federally controlled government stockpiles,” wrote Loris,”
Why? Because Mr. Loris says so, that’s why! *I* would think they would gouge beyond reason, allowing the rich to still tool around but sidelining ambulances and fire trucks. But that’s just me.
The article misses the elephant in the room : the US shale plays now are a gigantic oil strategic reserve. In case of a crisis, one will just add more rigs.
It is an ominous message for US Allies however : Essentially it tells them that in case of a strategic oil shock, they are on their own. If Europeans had a whiff of strategic common sense, they would instruct the ECB to purchase that oil in situ using freshly minted euros.
There is a reason they are called “plays” and there are only so many rigs available to boot. So you need to build more rigs, which means people who build rigs need to get to work and also when there use even more energy (but probably from solar! :)).
I personally don’t care what they do with the SPR, but I know the people that want to sell it off have no good reasons for it, they just want to give their sugar daddies another profit center.
Possible buyer recommends selling at a time when prices are low? Cui bono…
This sounds like our government at it’s usual. They probably bought the oil when the price was high. Now that want to sell it when the price is down. To me that’s not income but a loss of revenue. Our government is always selling public assets at bargain basement prices.
Yep. when oil price are high, people worry about the supply and the strategic oil reserve sounds like a good thing. When oil prices are low, it seems like a waste of government resources…. Kind of human nature.
It’s President Trump’s business acumen that rules the “buy high, sell low” policy with the SPR. Perhaps the SPR could then file for bankruptcy?
This. Is. Sheer. Madness. Cant believe the Koch’s are so crazy as to put the whole country at jeopardy! They alongwith their thinktanks and foundations need to be classified as a national security threat! What’s the FBI and CIA doing chasing needles in a haystack when its so obvious who the security threats are.
Get rid of it.. We’re sitting on over 100 yrs. of reserves so screw the IEA..
We’re already exporting and with horizontal drilling production can be quickly ramped..
OPEC is dead, long live opec..
History may not repeat itself, but it really does rhyme. From the Wikipedia article about the Teapot Dome Scandal:
In the 1920s, the U.S. Strategic Petroleum Reserve didn’t exist, but the Naval Petroleum Reserve performed a similar function.
Trump has imitated Richard Nixon by firing James Comey, and now he is imitating Warren G. Harding. What’s next? Will he imitate Andrew Jackson and murder a few thousand American Indians?
Another parallel to the Harding years. I keep telling people, it’s not the 1930s all over again like the “fourth turning” chicken littles are squawking, it’s actually 1921. Icing on the cake would be if Trump has a mistress. It’s clear wifey’s mad at him for something.
I imagine new zealand contractors are busy creating a reservoir for this old fashioned stuff on peter thiel’s estate.
His tailor’s wil be instructed to make it ‘humungous’, and he is auditioning chelsea as his sub human familiar.
Ridiculous? Check back in 5 years.
“Private inventories and reserves are abundant, and open markets will respond more efficiently to supply shocks than federally controlled government stockpiles,” wrote Loris”
Sure! The ones Loris and Heritage Foundation serve to can’t wait for the the logic of the private market to act under the emergency shock supply scenario.